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Ameriprise Continues Tilt Toward Variable Products: Earnings

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What You Need to Know

  • COVID-19 continued to help Ameriprise long-term care insurance results.
  • The employers that use Principal's specialty benefits plans added employees.
  • Principal is also reporting higher individual life sales.

Ameriprise Financial Inc. (AMP)is staying on the same path in the life insurance and annuity markets.

Executives at the Minneapolis-based financial services company said Tuesday that they are continuing to cope with low interest rates by focusing on the sale of variable products that are light on guarantees.

Jim Cracchiolo, the CEO, talked about life and annuity products during a conference call the company held to go over first-quarter earnings with securities analysts.

Cracchiolo told the analysts that Ameriprise is arranging to reinsure its remaining block of fixed annuity business.

In the variable annuity market, the company is promoting the sale of products without living benefits, or with only partial protection against loss of account value. Sales were 33% higher than they were in the first quarter of 2020, and variable annuities without living benefits now account for 64% of the company’s variable annuity sales.

In the life market, Ameriprise is focusing on the sale of variable universal life (VUL), rather than indexed universal life. VUL sales were up 76%, year-over-year.

“We’re focused on making sure we have the right product for this rate environment, while maintaining strong underwriting,” Cracchiolo said.

Ameriprise as a whole reported $437 million in net income for the latest quarter on $3.4 billion in revenue, compared with $1.9 billion in net income on $3 billion in revenue for the first quarter of 2020.

The Retirement & Protection Solutions unit recorded $183 million in pretax adjusted operating income on $787 million in revenue, up from $167 million in operating earnings on $759 million in revenue for the year-earlier quarter.

Sales of variable annuities increased 30%, to $1.5 billion, the company said.

In other earnings news, Principal Financial Group Inc. (PFG) also posted its first-quarter results.

Principal did not give details about COVID-19 claims, but, at its U.S. insurance solutions business, benefits, claims and settlement expenses increased by $102 million, to $771 million, as premiums increased just $19 million, to $702 million.

Employment at the employers that use Principal specialty benefits unit products, such as group dental, group life and group disability, was strong: The number of people in the groups Principal covers grew 0.8%.

The Des Moines, Iowa-based insurer is reporting $517 million in net income for the first quarter on $3.2 billion in revenue, up from $289 million in net income on $4.6 billion in revenue for the first quarter of 2020.

Commission expense increased to $237 million, from $229 million.

At the retirement and income solutions unit, which sells annuities, pre-tax operating earnings increased to $288 million on $1.2 billion in operating revenue, from $205 million on $2.6 billion operating revenue.

Commissions at that unit increased to $58 million, from $50 million.

Earnings at the U.S. insurance solutions unit, which sells products such as life insurance, disability insurance and dental insurance, fell to $95 million on $1.2 billion in operating revenue, from $129 million on $1.1 billion in operating revenue.

U.S. insurance solutions unit commission expense decreased to $102 million, from $104 million.

Here’s what happened to Principal’s U.S. sales of certain types of products, when compared with the first quarter of 2020, in terms of annualized premium revenue:

  • Group Dental and Vision: $61 million (down from $74 million)
  • Group Life: $22 million (down from $24 million)
  • Group Disability: $38 million (up from $33 million)
  • Individual Disability: $13 million (unchanged)
  • Individual Universal and Variable Life: $48 million (up from $33 million)
  • Traditional Life: $24 million (up from $22 million)

Ameriprise headquarters in Minneapolis. (Photo: Bloomberg)